Nordicum - Real Estate Annual Finland 2014 - Page 69

Photo: Sini Pennanen
The real estate sector is still experiencing its share of the
uncertainties that impact the economy. The volume of transactions
remains on a low level, the leasing of business premises has plenty
of challenges and construction projects are slow to move forward.
J
anne Larma from Advium Corporate Finance argues that one problem in the
market right now is the narrow investor
base: the buyers in recent transactions have
been domestic institutional players (along
with just a few Nordic and German funds
or investors). Furthermore, many players of
this rather small group limit themselves to
the Helsinki Metropolitan Area – and focus
on clear-cut “core” targets.
“It seems rather typical that investors
are turning away from all risk and looking
for guaranteed income. Of course, the situation has been about the same for over four
years now and there is no quick change in
the future, either, even though funding issues have improved of late,” says Larma.
For the construction market, he lists
the non-active leasing market as a significant
problem that has quieted things down in office construction very effectively indeed – if
one ignores the very best locations and their
high-profile projects. In residential construction and the raising of new shopping centres there is still momentum left, however,
and more of a ‘business-as-usual’ mentality.
Gaining Momentum
Despite the apparent challenges, many experts feel that there is light at the end of the
tunnel. Janne Larma shares this view: the
outlook is better now than 6 or 12 months
ago.
“Funding is available at terms which
have improved a bit and many funds have
been successful in raising new capital.” Especially the new residential and healthcare
funds have hit the ground running. Also, the
stock market has been looking rather robust
of late.
“The sentiment is better now than last
spring. Even though the willingness to take
risks is still weak, we feel that the next 6–12
months will be clearly more active than what
we saw in 2013.”
but probably in 12-18 months investors will
find their courage again.
”At the moment it is clearly visible that
many European, opportunistic funds have
assembled a significant volume of capital
and at some point also the Finnish market
can attract a share of the capital flows. On
the other hand, it would be very good indeed
if we finally found some investors in Finland
that would recognise the excellent yields potential of the real estate market outside Helsinki,” Larma says, expressing a wish that
perhaps eventually a domestic fund will specialise in this segment.
Too Much Office Space
Leasing of business premises is an uphill
struggle in many cases as companies are
not too keen on outdated premises – with
weak accessability – that are well represented in the market. There is overflowing
supply which means that the customers can
have their pick and often decide to go with
brand new whenever they can. Janne Larma
points out that the office market is not one
and the same; certain areas may still enjoy
nice demand (and even be lacking in appropriate premises).
“It would seem that the tenants look
for high quality premises that are flexible
enough for their purposes – and it should
feature good connections and be located
near diverse services, too,” Larma lists the
requirements for many tenants in the market right now.
Grace Under Fire
According to Larma, during that last 20
years the Helsinki Region has witnessed
a development where a few highly attractive business centres have established themselves so well that they enjoy steady demand
even when times are tough; and, at the same
time, there are old premises in fringe areas
which
All Eyes on Prime? are hard-pressed to get anybody interested.
”It would be sensible – and highly recTraditionally, the safe haven for investors in
ommendable – that an effort was made to
murky waters is prime targets, but this soturn these vacant premises with poor yields
lution does not fix all problems, since there
to new use, by means of modernisation or
are only a limited number of targets of this
conversion,” he says, adding that in recent
quality and the yield levels are low.
years the sector has seen the emergence of
Janne Larma is expecting for investors
few active players who make profit by givto start looking for targets outside prime as
ing new life to tired old premises.
soon as they get tired of poor yields and feel
“In the Helsinki Metropolitan Area,
that they could stomach a bit of risk. But the
there is a number of such projects with solid
timing is still iffy; Larma says that higher
prospects going on right now.”
risk is not deemed attractive at the moment,
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